Perception Drivers Blog

Reputation as an Intangible—and Priceless—Asset

When reviewing assets on a balance sheet, those with even basic accounting knowledge will zero in on line items such as cash, cash equivalents and inventories.

There is, however, one intangible asset—specifically, corporate perception and reputation—that is frequently overlooked and is a prospective
driver of both an enterprise’s sales, profitability and market value.

If 2017 taught us anything, it is that the corporate world seemingly has learned nothing—of reputation’s pivotal role in enhancing enterprise market
value and how fleeting this asset can be when misused.

Is this an overstatement? Consider United Airlines forcible removal of a passenger from a flight last spring. Or think about how the gloss came off ol’ Apple with recent revelations that it concealed battery-charge
issues on older iPhones.

These fiascoes delivered damaging blows to perception: trending instantaneously over social media, dominating news cycles, and alienating stakeholders.
And they pose genuine threats to United and Apple’s top lines by undermining customer affinity and drawing down reservoirs of goodwill that take decades
to build.

In that vein of learning nothing, it is hard to fathom that earlier perception and reputation crises at leading companies didn’t teach, at the very least,
something. In prior years, Wells Fargo,
Volkswagen and Samsung—and
the previously unfamiliar (at least to consumers) Takata,
which gained infamy for its exploding airbags—took severe hits to corporate and brand perception for, at minimum, betraying their stakeholders’
trust and, in the worst situations, breaking laws.

The study of the pathways linking reputation and financial performance are by no means a new-fangled concept. One of the leaders in the field, Dr. Charles
Fombrun, formerly a professor of management at NYU’s Stern School of Business and, earlier, The Wharton School at University of Pennsylvania, co-authored
one of the best books on the topic—Fame and Fortune: How Successful Companies Build Award-Winning Reputations—more
than a decade ago. The organization he founded—Reputation Institute—continues to do groundbreaking work on perception drivers and the related
areas such as corporate social responsibility.

What these recent reputation gaffes underscore to those of us here at FolFry is that there is still considerable work to be done. Consequently, we are
declaring 2018 as the Year of Reputation as a Priceless Asset and will make the topic a recurring theme here on the Perception Drivers blog.

We are content to let the CFOs be stewards of balance sheet tangible assets. Our province is that invaluable, intangible asset: perception management.
We do not expect to change the world. But we’re hellbent to help anyone who’ll read or listen to us understand that—individually or institutionally—we
each have just one reputation. And to build favorable public perception among all stakeholders requires managing it judiciously.